If Government Increases Its Purchases by $20 Billion and the MPC

question 51

Multiple Choice

If government increases its purchases by $20 billion and the MPC = 0.9, the resulting increase in the consumption component of AD is:

• A)​$2 billion.
• B)​$18 billion.
• C)​$180 billion.
• D)​$200 billion.

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Definitions:

Actuarial Assumptions

Hypothetical conditions used for projecting financial or insurance outcomes, involving demographic, economic, and other factors.

Prior Service Cost

The cost associated with the increase in pension benefits related to years of service credited in a pension plan amendment.

Straight-Line Basis

A method of calculating depreciation and amortization by evenly spreading the cost of an asset over its useful life.

Pension Retirement Benefits

Long-term benefits or compensations provided to employees upon retirement, which may include contributions made by the employer to a pension plan.